Currency Thoughts

An Updated Look at How the U.S. Economy Performed Under Democratic and Republican Presidencies

August 8, 2011

The most visited post among all 3,002 articles on the Currency Thoughts web site remains one of the first, a comparative study of how five U.S. vital signs behaved when the president was a Democrat and when that person was Republican.  That article screened on August 19, 2008, less than a month before the collapse of Lehman Brothers.  The five indicators I examined were real GDP growth, nonfarm payroll employment growth, total consumer price inflation, movement in the Dow Jones Industrials Average, and movement in the dollar against the D-mark prior to 1999 and euro from that year onward.  From January 20, 1961 through January 20, 2001, Democrats occupied the White House for exactly twenty years, and the president was from the Republican Party for an identical 20-year period.  This equal time element lent the study a nice symmetry.

I spliced the Democratic and Republican administrations together into an aggregated 20-year-long Democratic administration and and 20-year-long Republican administration.  A table was created expressing the change in each indicator on an annualized percentage basis.  A third column in the table labeled Bush43 gave the changes for the still unfinished Bush administration.  Because fixed dollar exchange rates were observed during the entire Kennedy and Johnson administrations, I did not include the U.S. currency’s performance for that period, so for the dollar only the column labeled "Democrat" covers just 12 years instead of 20.  The table and original article can be found by clicking here.  A number of spin-off articles focusing on each indicator alone can also be visited by using links available in the August 2008 article.

It’s time to update the original table.  Three more years of data available, and price, GDP, and jobs figures have been revised.  The main findings of the original study still hold but are overshadowed by another development.  In spite of very depressed GDP and employment under President Obama, the United States during Democratic administrations experienced faster growth in real GDP and jobs, better stock market behavior, less inflation, and a stronger dollar.

In the table below, the complete Bush43 record is isolated into a third column.  The first two-and-a-half years of the Obama administration is displayed in an added fourth column.  Unlike the first table, the results in the columns labeled Democrat and Republican incorporate what’s happened since the Clinton administration.  Instead of representing twenty years each in total, the collective Republican presidency covers twenty-eight years, and the composite profile for a Democrat splices data from a total of just over 22.5 years.  Currency and share price data for August 8, 2011 were taken at 15:00 GMT.

% Per Annum	Democrat	Republican	Bush43	Obama
GDP Growth	3.9%	2.5%	1.6%	1.2%
Employment	2.5%	1.2%	0.1%	-0.7%
CPI	3.8%	4.3%	2.4%	2.4%
DJIA	8.8%	3.5%	-3.5%	14.1%
Dollar	0.1%	-3.8%	-4.4%	-3.3%

The original study in the summer before a contentious presidential election made sense.  Politicians of every color were claiming to know the truth that will best "establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and securing the blessings of liberty" to the present citizenry and its posterity.  My idea was to see if either party had accomplished the above mission of the U.S. Constitution better, at least those parts dealing with the economy, and I was surprised to find the generic Democrat administration topped the leader board in all five categories, even inflation.

The finding that really sticks out frighteningly above, however, is the abrupt and sharp deterioration of GDP and jobs growth over the past 10.5 years.  This happened despite the achievement of lower inflation than in earlier decades.  It happened after sharp tax cuts and in the wake of the 9-11 attacks.  There is no sign of America coming out of its funk.  On the contrary, I share the widespread view that a new recession may be coming soon.  When separated by over two years of expansion, I’m reluctant call the development even a "double dip" as many are doing.  This will be a distinctly new economic downturn, following a short, shallow and all-together more disappointing recovery than even the pessimists were anticipating.  The Great Depression, by comparison, began in August 1929 but was far in the rear-view mirror by 1941 when GDP soared 17.2%, and the 1.0% per annum net growth between 1929 and 1943 was not substantially weaker in degree than the 1.5% pace between 2Q00 and 2Q11.

What will provide the impetus to snap the U.S. economy and its G7 counterparts out there present doldrums as a world war did in the early 1940s?  Nothing is on the horizon, and none of the pundits have a compelling clue.  For one thing, politicians are concentrating on deficit reduction, not the promotion of growth.  The first step toward redemption, acknowledging a problem, has not been taken.  From the vantage point of mid-2011, the United States resembles Japan since 1990 much more closely than the late 1930s.  Japan’s been down and out for two decades, a period over which GDP advanced 0.8% per annum and by less in the second ten years than in the first ten.  The threat to the United States from the present bout of weak and neglected economic growth cannot be understated.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

Tags: DJIA, Dollar, U.S. GDP and jobs, U.S. inflation

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This entry was posted on Monday, August 8th, 2011 at 11:28 am and is filed under Deeper Analysis, Larry's Blog. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.